Abraxas Announces $11 Million Second Quarter Profit On Sequential Twelve Percent Increase In Production Despite Lower Oil Prices

(b) Includes Abraxas’ equity interest in Blue Eagle’s production.

BALANCE SHEET DATA
(In thousands)			June 30, 2012					December 31, 2011
Cash			$	308				$	—
Working capital (a)				(15,001	)				(14,404	)
Property and equipment – net				203,162					179,552
Total assets				253,295					241,150
Long-term debt				136,664					126,258
Stockholders’ equity				75,374					62,651
Common shares outstanding				92,335					92,261

(a) Excludes current maturities of long-term debt and current derivative assets and liabilities.

ABRAXAS PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands except per share data)			Three Months Ended June 30,										Six Months Ended June 30,
				2012					2011					2012					2011
Revenues:
Oil and gas production revenues			$	15,934				$	16,653				$	32,313				$	30,500
Other				4					3					18					4
				15,938					16,656					32,331					30,504
Operating costs and expenses:
Lease operating				5,382					5,566					11,316					9,581
Production taxes				1,489					1,426					2,985					2,680
Depreciation, depletion, and amortization				5,380					3,780					10,218					7,210
Impairment				1,306					—					1,306					—
General and administrative (including stock-based compensation of $722, $706, $1,199 and $1,069)				2,404					2,446					4,305					5,092
				15,961					13,218					30,130					24,563
Operating income (loss)				(23	)				3,438					2,201					5,941
Other (income) expense:
Interest income				(1	)				(2	)				(2	)				(4	)
Interest expense				1,270					1,336					2,465					2,941
Amortization of deferred financing fees				266					770					296					1,270
(Gain) loss on derivative contracts - realized				(914	)				1,113					(866	)				1,228
(Gain) loss on derivative contracts – unrealized				(10,296	)				(7,959	)				(9,420	)				3,019
Equity in (income) loss of joint venture				(1,251	)				(769	)				(2,034	)				(1,518	)
Other				—					12					42					87
				(10,926	)				(5,499	)				(9,519	)				7,023
Net income (loss)			$	10,903				$	8,937				$	11,720				$	(1,082	)
Net income (loss) per common share - basic			$	0.12				$	0.10				$	0.13				$	(0.01	)
Net income (loss) per common share - diluted			$	0.12				$	0.10				$	0.13				$	(0.01	)
Weighted average shares outstanding:
Basic				91,808					91,409					91,775					88,653
Diluted				93,263					93,506					93,448					88,653

ABRAXAS PETROLEUM CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

To fully assess Abraxas’ operating results, management believes that, although not prescribed under generally accepted accounting principles ("GAAP"), discretionary cash flow and EBITDA are appropriate measures of Abraxas' ability to satisfy capital expenditure obligations and working capital requirements. Discretionary cash flow and EBITDA are non-GAAP financial measures as defined under SEC rules. Abraxas' discretionary cash flow and EBITDA should not be considered in isolation or as a substitute for other financial measurements prepared in accordance with GAAP or as a measure of the Company's profitability or liquidity. As discretionary cash flow and EBITDA exclude some, but not all items that affect net income and may vary among companies, the discretionary cash flow and EBITDA presented below may not be comparable to similarly titled measures of other companies. Management believes that operating income calculated in accordance with GAAP is the most directly comparable measure to discretionary cash flow and EBITDA; therefore, operating income is utilized as the starting point for these reconciliations.

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